2023 (7) TMI 45 - AT - Central Excise

Applicable rate of duty for removal of any normal goods in terms of sub-section (2) to Section 3 or Section 4 or Section 4A of the Central Excise Act, 1944 - change in the rate of duty applicable from the time when the machine was sent for exhibition to the time when it was actually sold - demand of differential duty equivalent to the CENVAT Credit availed when the goods were returned to the factory - HELD THAT - There are no dispute by the Revenue as to the fact or the contention of the appellant that upon receipt in the factory from the exhibition, the product had lost its originality or that the same required reprocess, etc., to bring it back to the original shape and only thereafter that the machine in question could be sold or removed as such. That means the product was brought back into the factory only to be re-processed and this claim of the appellant was never disputed by the Revenue - the appellant carried out the required process of quality inspection and replaced the Servo Driven Filler with a Pneumatic Driven Filler. Further, the original machine that was made, was sent to the exhibition, which was brought back and after elapsing of some time, the machine was sold and cleared like any other excisable goods. That being the case, there are no contravention of the Valuation Rules by the appellant, as an important part of the machine sold has been replaced with a less advanced component, slight reduction in the value of the machine sold is found to be normal. The impugned order demanding differential duty of Rs.1,09,489/- is not sustainable and so, set aside. Accordingly, the penalty imposed is also set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the liability of the appellant to pay duty equivalent to CENVAT Credit availed when goods were returned to the factory and the applicable rate of duty for removal of normal goods under the Central Excise Act, 1944.

Issue 1: Liability to pay duty equivalent to CENVAT Credit availed:
The appellant, engaged in manufacturing Packing Machinery, removed finished products for display in an exhibition and later cleared them on payment of duty. The Revenue doubted whether the process the goods underwent before removal constituted manufacturing, requiring the appellant to pay an equal amount of CENVAT Credit taken. The appellant contended that the goods were sold at different prices, underwent reprocessing, and the duty rate changed between clearances. The lower authorities demanded differential duty, interest, and penalty, which the appellant challenged through appeals.

Issue 2: Applicable rate of duty for removal of normal goods:
The main difference between the machinery displayed at the exhibition and the one sold later was the change from Servo Drive to Pneumatic Drive. The appellant argued that the product required reprocessing and replacement of components before being sold. The Tribunal found that the appellant conducted quality inspection, replaced the component, and the slight reduction in value was normal. The Tribunal held that the demand for differential duty was not sustainable, setting it aside along with the penalty imposed.

In conclusion, the Appellate Tribunal CESTAT Chennai ruled in favor of the appellant, setting aside the demand for differential duty and penalty. The Tribunal found that the appellant's actions were in accordance with the Central Excise Rules and Valuation Rules, allowing the appeal with consequential relief.